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Itís time to run the rule over federal advertising

By Andrew Leigh - posted Wednesday, 2 November 2005


Perhaps the federal government has done us all a favour. By spending almost a million dollars a day on television, radio and print advertisements to tell us why it doesn’t like the present industrial relations system, it may have finally prompted a rethink of all government advertising.

From an economics perspective, there’s an easy way to judge whether a government advertising campaign is good policy. If the benefits don’t exceed the costs, it should be scrapped.

With the WorkChoices campaign, the exercise is trivially simple. Since the Coalition has a majority in both houses, the laws will be coming into force within months. So whatever you think of the merits of the industrial relations reforms, the societal benefit of the advertisements themselves is zero. As High Court Justice Michael McHugh noted last week: “I can see no connection - rational or otherwise - between these advertisements and higher productivity and higher wages.”

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For just this reason, the United States bans advertisements like the WorkChoices campaign, by preventing the use of public funds “for publicity or propaganda purposes”, or “to favour or oppose, by vote or otherwise, any legislation or appropriation by Congress”. You don’t have to be a partisan to see this as a sensible restriction on government expenditure, though Australia’s conservative think tanks have been suspiciously silent over their attitude to the WorkChoices advertisements.

But what is less often recognised is that most other government advertising campaigns would probably also fail a cost-benefit test. While many have criticised the WorkChoices advertisements, it is merely the latest of a series of campaigns whose public benefits are dubious at best. In 2004, for example, the federal government devoted $16 million to a pre-election campaign telling Australians that they were “strengthening Medicare”, and $5 million to advertisements informing people that superannuation contributions would now be treated more generously.

According to figures compiled by the Parliamentary library, the Howard Government has spent an average of $122 million a year (in today’s dollars) on government advertising since it came to power in 1996. And Labor was far from pure - real government advertising expenditure averaged $86 million dollars a year under the Keating Government.

Plenty of other government advertising campaigns would also fail a robust cost benefit test. Did the $6 million Regional Telecommunications Campaign bring $6 million of public benefit? Probably not. How about the $26 million Pharmaceutical Benefits Campaign? Unlikely. Even in the case of the $8 million a year spent on defence recruitment, it is difficult to know whether taxpayers are getting value for money, or whether the government is using its recruitment campaigns partly as cover to tell the rest of us what a terrific military it presides over. Another $8 million in signing bonuses for new recruits might well be a better way to attract more soldiers.

The trouble is that government advertising campaigns are almost never subjected to rigorous evaluations. Past reports by the Audit Office have noted the lack of protocols on government advertising, and the propensity for government advertising to increase sharply before an election is called. As Melbourne University’s Sally Young has pointed out, this gives a substantial advantage to the incumbent party. In the 2004 federal election campaign, the parties together spent about $40 million on party-political advertising - less than half of the $95 spent on federal government advertising in the lead-up to the poll.

With the federal government’s advertising spending now out of control, perhaps the time has come to take a different approach. In general, the federal government does not need to advertise. Major policy changes are reported in the media, and even jobs and tenders can be advertised in the government gazette. If the government really believes than an advertising campaign meets the cost-benefit test, it should be willing to submit it for scrutiny by an independent body, such as the Productivity Commission. Few campaigns would pass, and taxpayers would be the better for it.

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First published in the Canberra Times on October 27, 2005.



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About the Author

Andrew Leigh is the member for Fraser (ACT). Prior to his election in 2010, he was a professor in the Research School of Economics at the Australian National University, and has previously worked as associate to Justice Michael Kirby of the High Court of Australia, a lawyer for Clifford Chance (London), and a researcher for the Progressive Policy Institute (Washington DC). He holds a PhD from Harvard University and has published three books and over 50 journal articles. His books include Disconnected (2010), Battlers and Billionaires (2013) and The Economics of Just About Everything (2014).

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